Preview: Woodside Energy earnings set to dip as investors eye strategic deals
26/08/2024 07:02
By Archishma Iyer and Rajasik Mukherjee
Aug 26 (Reuters) - Woodside Energy WDS.AX , Australia's
top independent gas producer, is on track to post a drop in
interim earnings on Tuesday, with investors focusing on its
deal-making strategy after the collapse of a $52 billion merger
with Santos STO.AX .
Perth-based Woodside is expected to report an underlying net
profit after tax of $1.11 billion for the six months ended June,
according to a Visible Alpha consensus cited by Jarden, compared
with $1.90 billion reported a year ago.
"Woodside's portfolio is ex-growth and very highly
concentrated in the yet-to-be-started Scarborough field. This is
problematic and necessitates M&A, in our view," analysts from
Citi said in a research note earlier this month.
The company is scheduled to report its first-half
results before markets open on August 27.
Woodside recently received primary environmental approvals
for its $12.5 billion Scarborough gas project in Western
Australia, which is seen as a growth catalyst, with its first
LNG cargo likely in 2026.
Despite some of Woodside's recent billion-dollar deals,
including the acquisition of LNG developer Tellurian TELL.A
analysts are uncertain about the energy firm's future M&A plans
to expand its LNG portfolio.
"The prevailing share price... along with our cautious
stance on oil into 2025 and the uncertainty on the dividend and
future M&A, we can’t yet argue value," analysts at Citi added.
Woodside traded at a P/E of 20.2 on Monday based on the last
12 months of earnings, compared to the broader Australian market
.AXJO which was trading at a P/E of 17.9, according to LSEG
data.
Lower demand from top consumer China, along with
geopolitical tensions in the Middle East have sent Brent crude
LCOc1 prices sharply lower from their 2022 highs.
Analysts at Jarden have lowered the estimate for Woodside's
dividend payout ratio to 65% from 80% due to costs associated
with its recent acquisitions.
Meanwhile, Santos reported a larger-than-expected drop in
half-year profit to $654 million, citing lower realized prices
and higher costs.
Santos, Australia's second-largest independent gas producer,
has become a potential takeover target after failing to agree on
a merger valuation with Woodside.
Santos' Chairman Kevin Gallagher has indicated a willingness
to sell certain projects or the entire $16.3 billion company, as
it has underperformed the broader energy index with a declining
share price.
(Reporting by Archishma Iyer and Rajasik Mukherjee in
Bengaluru; Editing by Byron Kaye and Nivedita Bhattacharjee)
((Archishma.Iyer@thomsonreuters.com;))